Government intervention in marketplace harms consumers

By Amy Ridenour
web posted March 13, 2000

One of the best things about the AOL/Time Warner merger is that AOL's acquisition of Time Warner's TV cable holdings should mean a cease-fire in AOL's effort to get government to choose sides among Internet competitors.

For over a year now, AOL has been trying to convince local governments to force TV cable systems to allow AOL to use the systems as if AOL had helped to develop them.

If consumers are fortunate, the AOL/Time Warner merger demonstrates that AOL now acknowledges that competition between companies should take place in the marketplace, not with government intervention.

Government intervention causes harm to consumers.

Take, for example, government foot-dragging and possible favoritism in the approval of technology that would allow individuals to purchase and affix postage through their home or business computer.

Such labor-saving technology could be a boon in an economy where increasing numbers of Americans work for small business, including home-based businesses that allow parents to earn a living while staying home with their children.

This technology allows individuals and small companies to mail packages weighing more than one pound without standing in line at the post office, as current postal regulations (in an effort to deter mail bombings like those by the hyper-environmentalist Unabomber) ban the use of live stamps on packages weighing more than a pound. The technology also keeps a log of postage use by category, a boon for accountants, and figures postage amounts more accurately and easily, a great benefit for those who ship a high volume.

Unfortunately, suspicions have arisen that the government is playing favorites among the companies vying to bring this technology to the market. Such favoritism, if true, could delay the arrival of this technology to desktops and, in this or any other field, can have the effect of driving companies out of a particular market. It can result in a reduction in research and development dollars dedicated to the invention, development and marketing of new products, slowing technological growth. It also results in less price competition, which typically means higher prices.

Consumers lose all around.

Four companies have been ready to bring "PC postage" to the public: E-Stamp, Neoposte, Pitney Bowes and Stamps.com. But last August the Postal Service only gave final approval to two of them: Stamps.com and E-Stamp. In this regard, the public necessarily must be concerned about rotating staff between the U.S. Postal Service, which regulates the entire computer postage industry and decides which firms will be permitted to sell it, and Stamps.com. Former Postmaster General Marvin Runyon, who left office in 1998, the same year the Postal Service began approving beta testing of computer postage, joined the board of directors of Stamps.com in February of 1999. As of May 1999, Runyon reportedly owned over 76,000 shares of the company's stock, which, at mid-January 2000's stock price of $43 a share, would be worth about $3.3 million. Media reports indicated that some members of the Postal Service's Board of Governors were concerned about Runyon's linkup with a company he had just been regulating.

Runyon was not the only regulator to join one of the regulated firms. In October the former coordinator of the Postal Service's computer postage beta test approval process was hired by Stamps.com.

The U.S. Postal Service has every incentive to be as neutral as possible when it comes to this, and any other, new technology, for some believe that, without technological innovation, parts of the Postal Service are destined to become obsolete. Postal officials are now predicting that, despite the growing economy and our growing population, the volume of first class mail will decline in 2003 and every year thereafter. 1

In today's world of e-commerce, being "first to market" can convey an important advantage. An advantage that is merited if the company has developed new technology or is quicker than business rivals. But not when it is the result of government favoritism.

Footnotes:

1 "Empowering Core USPS Service with Electronic Technology," by Gene A. Del Polito, Ph.D., president, Association for Postal Commerce, prepared for Target Marketing.

Amy Ridenour is President of The National Center for Public Policy Research, a Washington, D.C. think tank. Comments may be sent to ARidenour@nationalcenter.org.

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